According to EB Broomberg and Des Kruger, in Broomberg on Tax Strategy:

“The common assumption is that trusts are some kind of tax panacea...Then, conversely, from a South African Revenue Service (SARS) perspective, trusts are viewed with a degree of suspicion and mistrust. [T]he truth lies somewhere between these positions. Trusts are useful vehicles, but there is little tax magic that arises from the utilisation of a trust.”

Before deciding whether to keep your trust, it is important to understand the following:

  •  What are the reporting obligations for SA trusts?  
  • How will a trust benefit my family? 
  • Should the trustees elect to retain the trust, and a professional trustee is introduced, what fees should be taken into consideration? 

Reporting obligations 

In certain instances, trustees, trust accountants and trust administrators are required to register as an “accountable institution” with the Financial Intelligence Centre (FIC). Some exemptions may apply; for example when dealing with testamentary trusts. It is advisable that, for a trust that is managed by the family unit itself, at least one of the trustees should be registered with the FIC as an accountable institution.

The deadline for such registration was 31 March 2023. It is imperative that those persons/organisations that have not yet registered with the FIC as accountable institutions do so as soon as possible. Once the registration of the relevant person / organisation has been completed, an anti-money laundering (AML) report should have been submitted to the FIC by 31 May 2023. 

Trustees are also required to register all of the beneficial owners of the trust. The report must be submitted to the Master of the High Court in a prescribed format.

Lastly, trustees of all SA trusts must also complete an IT3(t) report and submit this to SARS annually by September of each year, commencing September 2023. The IT3(t) report will contain prescribed information relating to trust distributions and their beneficiaries.  

Trustees who fail to comply with any of the above requirements can be fined up to R10 million or jailed for five years.  

What are the benefits of a South African trust? 

Let’s start with what a trust is. A trust is formed when assets are given to a trustee to administer on behalf and for the benefit of the beneficiaries of the trust. Ownership of the assets is relinquished to the trust.

Tax aside, trusts fulfil an important function in society.

Trusts are an ideal vehicle for assets to be administered on behalf of individuals who can’t do so themselves; for example, minors and handicapped individuals. Age-related issues can also diminish someone’s capacity. Trusts negate the need for such individuals to be placed under curatorship. Trustees have a fiduciary duty to ensure that the beneficiaries of the trust are properly looked after, even once the founder of the trust is no longer around.

Trusts are flexible and can be amended to suit a family’s ever-changing needs as well as adapted to the changing global tax, legal and financial landscape.

There’s an adage that goes: “I want to leave my children enough money so that they can do anything, but not so much that they do nothing.”

Trusts are a useful succession planning tool that can protect beneficiaries, even against themselves if necessary. They allow the founder of the trust to build core values and principles into the trust documents. The trustees must always consider and adhere to these core values and principles when administering and distributing the assets to beneficiaries. These values and principles will continue to live on, even when the founder is no longer.

Trusts also allow for assets to be split between family members and are an efficient way to house complex assets. They also offer protection from creditors. Assets which belong to a trust are not subject to executors’ fees, which can be up to 3.5% (plus VAT) on the gross value of an estate.

On the tax front, trusts still have their benefits, even if these benefits have been whittled away over the years. But is the juice worth the squeeze?

Tax benefits include estate duty and donations tax savings. Furthermore, the conduit principle allows income and capital gains generated in a trust to be taxed at an individual’s tax rate, which is generally lower than the rate at which a trust is taxed. Indeed the rate at which trusts are taxed has increased in recent years.

Terminating a trust also carries a tax and administrative cost. When a trust disposes of an asset to a beneficiary, it’s considered a disposal for capital gains tax purposes and could trigger a taxable capital gain. Any asset (along with its growth), that is distributed to a beneficiary, would now fall into the beneficiary’s estate for estate duty purposes.

So, what do trustees need to think about? 

  • The tax and administration costs of the trust. A professional independent trustee must be appointed to not only ensure compliance with the raft of changes that have been introduced to date, but also to ensure compliance with the trust deed.
  • The tax benefits and estate duty savings the trust provides, versus the cost it carries. Fees (for professional trustees and administrators) can range between anything from R20,000 to R100,000 per trust, excl VAT, per annum, depending on the complexity of the trust.
  • The commercial and emotional rationale for having a trust, which includes the significant benefits of the preservation of family wealth.  

“Should I keep my trust?” may seem like a straightforward question, but unfortunately it doesn’t have a straightforward answer. The answer to the question depends on the unique circumstances and dynamics of each family. 

Get Focus insights straight to your inbox


Please complete all required fields before sending.

Thank you

We look forward to sharing out of the ordinary insights with you

Sorry there seems to be a technical issue


Although information has been obtained from sources believed to be reliable,  Investec Wealth & Investment International (Pty) Ltd or its affiliates and/or subsidiaries (collectively “W&I”) does not warrant its completeness or accuracy. Opinions and estimates represent W&I’s view at the time of going to print and are subject to change without notice. Investments in general and, derivatives, in particular, involve numerous risks, including, among others, market risk, counterparty default risk and liquidity risk. The information contained herein is for information purposes only and readers should not rely on such information as advice in relation to a specific issue without taking financial, banking, investment or other professional advice.  W&I and/or its employees may hold a position in any securities or financial instruments mentioned herein. The information contained in this document does not constitute an offer or solicitation of investment, financial or banking services by W&I . W&I accepts no liability for any loss or damage of whatsoever nature including, but not limited to, loss of profits, goodwill or any type of financial or other pecuniary or direct or special indirect or consequential loss howsoever arising whether in negligence or for breach of contract or other duty as a result of use of the or reliance on the information contained in this document, whether authorised or not.  W&I does not make representation that the information provided is appropriate for use in all jurisdictions or by all investors or other potential clients who are therefore responsible for compliance with their applicable local laws and regulations. This document may not be reproduced in whole or in part or copies circulated without the prior written consent of W&I.

Investec Wealth & Investment International (Pty) Ltd, registration number 1972/008905/07. A member of the JSE Equity, Equity Derivatives, Currency Derivatives, Bond Derivatives and Interest Rate Derivatives Markets. An authorised financial services provider, license number 15886. A registered credit provider, registration number NCRCP262.